For the past six years, Cook County tax officials mistakenly believed billionaire Donald Trump, the presumptive Republican nominee for president, didn’t pay all the property taxes owed on his namesake Chicago skyscraper, shorting schools and other government agencies.
They were wrong.
They thought Trump had failed to pay a nearly $2.4 million tax bill in 2010 — a bill that had ballooned to nearly $4.7 million this year, including penalties and interest.
But property-tax records for the Trump International Hotel & Tower examined by the Chicago Sun-Times showed county tax officials had miscalculated Trump’s 2010 bill.
The main reason? A last-minute tax cut Trump got after his attorney, Ald. Edward M. Burke (14th), persuaded the county assessor to slash the tower’s value by more than 70 percent, the Sun-Times found.
In fact, county tax officials now agree, Trump paid all of his property taxes in full. They are moving to erase the erroneous tax delinquency that has been on their books for years.
But the Sun-Times also found that county officials mistakenly gave Trump a $23,649 refund on taxes he paid in 2010. They say Trump needs to repay that.
“This error was only discovered last week when a local reporter submitted a . . . request for all the tax records for the property,” according to a written statement from Cook County Treasurer Maria Pappas’ office.
Trump’s tax mess illustrates the complexities of a Cook County property tax system that’s overseen by political leaders and influenced by insiders like Burke, the powerful alderman and Democratic Party ward boss.
Among the complicating factors in this case were:
• An Illinois Supreme Court ruling regarding downtown property taxes for a proposed light-rail transportation line dubbed the “central area circulator” — a plan that was killed years earlier by Burke and the Chicago City Council.
• The court ruling made it difficult for county officials to collect taxes from a few dozen buildings that normally would have received one tax bill for their combined commercial and residential space — including the Trump Tower while it was under construction.
The errors in Trump’s tax bills came to light as the Sun-Times was examining how much Burke’s law firm had saved the New York developer.
The newspaper reported last month that Burke saved Trump $11.7 million between 2009 and 2015 by convincing the county assessor and a second group of tax officials — the Cook County Board of Review — to lower the assessments on Trump’s skyscraper. The newly obtained records show the figure is actually higher: The alderman has saved Trump more than $14.1 million altogether.
And it could end up higher yet. Burke is now asking Cook County judges to cut Trump’s property taxes even more.
The never-built central area circulator light-rail system that played a key role in county officials’ confusion over Trump’s taxes dates to the administration of Mayor Harold Washington. The plans continued to move along under Mayor Richard M. Daley.
In 1991 — a decade before Trump decided to build in Chicago — the City Council created what it called “Special Service Area 12” so it could collect additional property taxes from landowners there to help finance a rail line that would operate from Oak Street to McCormick Place between Lake Michigan and the Chicago River.
But a property owner sued the city, arguing that those who own residential property shouldn’t have to pay the so-called circulator tax because businesses would be the main beneficiaries of the rail system.
The Illinois Supreme Court agreed — prompting Cook County tax officials to set up a separate billing system for the few dozen buildings that had been getting a single property tax bill covering their commercial and residential space.
After the court ruling, the owners of those buildings got two tax bills: a “circulator bill” for their commercial space and a separate tax bill for residential space that couldn’t be charged the circulator tax.
The city of Chicago collected the circulator tax between 1991 and 1994, when the Daley administration derailed the project.
In 1997, the City Council voted to refund all of the unspent money in the circulator fund. But aldermen have never killed Special Service Area 12 — so county tax officials continue to list it on property tax bills even though no money for that has been collected in more than two decades.
“There was no need for two different bills,” according to Pappas’ office. “Nevertheless, each billing cycle, the circulator properties continued to receive two tax bills, the sum of which was exactly the same as it would have been had only one bill been sent combining the two.”
The circulator territory included the Chicago Sun-Times’ old building at 401 N. Wabash. Trump announced plans in 2001 to redevelop the site, tearing down the building and replacing it with a soaring skyscraper that would include a hotel, restaurants, stores and residential condos.
As the skyscraper was rising, Trump had the property subdivided for tax purposes so each hotel room would get a separate tax bill, while the residential condos and remaining retail space would be taxed together, as one parcel.
That prompted county officials to split his 2010 taxes for the condos and retail space into two bills — a residential bill and a circulator bill — even though the city no longer was collecting any taxes for the circulator.
After then-Cook County Assessor James Houlihan issued his assessment for Trump’s residential condos and retail space in 2010, Burke appealed to the Board of Review, which slightly lowered those figures.
With the assessment — which is used to calculate property taxes — set, Cook County Clerk David Orr calculated how much Trump had to pay.
Then, in early November 2010, Pappas sent Trump two bills: $5.8 million for the residential condos and $2.4 million for the retail areas.
A few days after the bills were mailed, Houlihan agreed to slash the value of the residential condos and the retail space by 70 percent, based on Burke’s argument that most of the space had yet to be occupied. And Houlihan issued a “certificate of error,” saving Trump $5.8 million on his 2010 property taxes.
Trump had to pay $2,375,080.56 in property taxes — $1,589,650.83 for the residential condos and $785,429.73 for the circulator bill on the retail space.
“But the split was not done correctly,” according to Pappas’ statement. “When a clerk at the assessor’s office entered the . . . reduction [resulting from Houlihan’s decision] into the county’s computer system, the assessor’s office made a scrivener’s error. Consequently, two bills were produced: one for $2,351,432.01 and another for $2,375,080.56.”
Trump paid the higher amount — the correct figure, which covered both the residential and retail space. But county officials recorded him paying taxes only on the residential space and not the retail space.
So even though Trump’s taxes were paid in full, for years county records have shown that he paid no taxes on the retail space. And, according to that erroneous reckoning, the interest was mounting — an additional $35,626 every month.
The 2010 bill was the only circulator bill Trump ever got because the following year the county began issuing separate tax bills for each individual condo. Trump has continued to receive a separate bill covering all the retail space.
The county didn’t stop issuing separate circulator tax bills until 2013 — though all of the commercial tax bills still contain a line item for Special Service Area 12. Which collects no money.
“This antiquated billing practice has led to considerable confusion over the years — for taxpayers and Cook County property tax administrators alike,” according to the statement from Pappas’ office.
Trump apparently never even knew the county considered him a delinquent taxpayer. County officials never pursued him to pay the supposedly delinquent taxes. Nor did they ever include them in their annual tax sale.
A year after Trump paid the 2010 taxes, county officials made another mistake. The county’s computer system erroneously determined that Trump had overpaid his 2010 taxes on the residential condos by $23,649.
The county sent him a refund application for that — even though it still had him on its books as owing nearly $2.4 million in circulator taxes.
Once Trump’s company — 401 N. Wabash LLC — completed the application, Pappas issued a refund check on Dec. 23, 2011.
Now, county officials acknowledge the refund was issued in error, and they are seeking repayment from Trump.